The cult of equities is not dead, according to Michael Jones, chairman and chief investment officer at Riverfront Investment Group.
Jones says six to seven percent has been the norm for stocks over very long time periods, and Gross is making the mistake of limiting his analysis to too short a time period.
"You look at the entire history of equities and they return six to seven percent over long 30 to 40 year investment horizons," says Jones. "Shorter term investment horizons and determined by the price you pay. Low prices tend to lead to above price returns and high priced tend to lead to low price retuns.
"Duh, the price you pay for something matters."
Gross argued in his newsletter that governments are going to seek inflationary solutions for years and even decades, which will dimish returns from equities.
"If labor and indeed government must demand some recompense for the four decade’s long downward tilting teeter-totter of wealth creation, and if GDP growth itself is slowing significantly due to deleveraging in a New Normal economy, then how can stocks appreciate at 6.6% real? They cannot, absent a productivity miracle that resembles Apple’s wizardry," writes Gross.
Despite the disagreement Jones said he is a fan of Gross.
"Let me say in a former job I allocated billions of my client's money to Bill. I have the highest respect for him as a bond manager and as a thought leader for our industry."